cbdMD Delivers on its Promise of Operating Improvement, adds Regulatory Depth to the Board

Management delivers on operating improvements while investing in future growth. cbdMD board appoints Dr. Sibyl Swift to the Board of Directors to fill Vacancy.

Charlotte, North Carolina--(Newsfile Corp. - August 11, 2022) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBDpA), one of the nation's leading and most highly trusted and recognized CBD companies, and operator of three of the leading CBD brands -- its flagship brand cbdMD, its animal health brand Paw CBD and its beauty and skincare brand cbdMD Botanicals, today announced our financial results for June 30, 2022. Excluding one-time Goodwill Impairment charges we cut our GAAP operating loss in half from the prior year quarter and made strong sequential gains.

"On our last investor call, we committed to deliver stronger earnings and realize $10 million in annual cost savings against our December 2021 quarter. Despite the many challenges faced this quarter - from the challenging macro environment for consumers including 30-year high inflation rates, to the retirement of Mr. Coffman, our brand founder and co-CEO, and the distraction of our former CEO's separation from our company we were able to deliver on our commitments. While we incurred a GAAP loss from operations of $33.1 million, the loss was mostly attributed to a one-time goodwill impairment charge of $30.8 million. The impairment was triggered because of the strong downward movement in our stock price during June as we dealt with leadership separation noise. Excluding this goodwill charges, this is the third sequential quarter of improvement in our non-GAAP operating income and the fourth consecutive quarter of Net Adjusted Operating Income gains, improving $1 million compared to the quarter ending in March 2022. We are building momentum. No stone was left unturned, and ongoing efforts have identified further opportunities to improve our operations.

"We have developed and are executing a multi-channel strategy to deliver sustained profitable revenue growth. The new leadership team is focused on new product development, improved efficacy for our consumers, optimizing product assortment, business fundamentals and delivering results. The organization has coalesced around a plan based on product differentiation, capturing greater share of the online market, strategically entering new food, drug and mass channels, and growing market share. Our number one priority is to become profitable by the end of the calendar year and grow from a stable base," said Ronan Kennedy, CFO and COO.

"While it was a major decision for me to step back this last quarter, as the Company's largest shareholder and Board member, I am more excited about the Company's strategy than I have been in years, and confident in leadership's ability to execute and take cbdMD to the next level. I founded the cbdMD brand based on the powerful benefits cannabinoids can have for its users and take comfort in the efforts our team is making to substantiate these benefits. Appointing Dr. Swift to the Board shows our commitment to lead with science and regulatory rigor second-to-none in the industry," said Scott Coffman, brand founder and board member.

Financial Highlights from our June 30, 2022 Quarter:

• We reported that our net sales for the June 30, 2022, quarter were $8.6 million versus net sales of $9.6 million quarter ending March 31, 2022, a decrease of 11%. Our net sales for the quarter ended June 30 2022 were down 19% compared to the prior year quarter ended June 30, 2021.

• We reported that our quarter ending June 30, 2022, direct to consumer (DTC) net sales were $6.5 million, versus $6.6 million for our quarter ending March 31, 2022, or a sequential decline of 1%. Our e-commerce net sales were down 17% compared to the prior year quarter ended June 30, 2021. We have made significant changes as well as reductions to our marketing investments over the last two quarters including a $1 million or 20% reduction sequentially and $1.9 million or 32% reduction year over year. Despite these reductions we began seeing strong website traffic gains starting in May with this trend continuing in June and July. We are acquiring more traffic at lower overall investments levels and are working to optimize our traffic and conversion rates.

• We reported that our quarter ending June 30, 2022, wholesale sales (including brick and mortar retail customers) were $2.1 million, versus $3.0 million for quarter ending March 31, 2022, or sequential decrease of 32%. Some of the declines were associated with the benefits tied to pipeline fills that occurred during the March 2022 quarter. Wholesale net sales were down 24% compared to the prior year quarter ended June 30, 2021. We have added a number of specific food, drug, mass, and convenience channel focused resources during the quarter and anticipate building wholesale inertia as we execute our plan over the next 2 quarters and beyond.

• We reported that our quarter ending June 30, 2022, gross profit margin was 69.0% versus 66.9% for the quarter ending March 31, 2022. Our gross profit margin was 68.1% in prior year quarter ended June 30, 2021. Significant action was taken to reduce our high-fixed overhead costs and make our cost of sale more variable and predictable.

• We committed to $10 million in annual cost reductions and SG&A expense of $9.7 million on our call in May. For the quarter ending June 30, 2022, the Company achieved the cost savings goals and recorded SG&A Costs of $8.3 million for the quarter. Excluding a contra-expense of $1.5 million related to RSUs and stock options forfeited during the quarter, our SG&A is down $4.1 million or 30% compared to the prior year quarter ended June 30, 2021. We anticipate further reduction in SG&A during the fiscal fourth quarter tied to realization of a full quarter of benefits from adjustments made during the fiscal third quarter as well as additional cost saving initiatives. We anticipate SG&A expense to be approximately $8 million for the fiscal fourth quarter.

• We reported a GAAP loss from operations of approximately $33.1 million which includes a one-time goodwill impairment of approximately $30.8 million in our quarter ending June 30, 2022. Excluding this impairment our non-GAAP loss from operations totaled $2.3 million. This compares to a $6.7 million GAAP loss from operations for our quarter ending June 30, 2021, a decrease of approximately 65% year over year. This decrease is primarily related to a $4.1 million reduction in operating expenses. Sequentially, our operating loss improved 54% from a $5.1 million loss.

• We reported non-GAAP adjusted operating loss of approximately $2.7 million in our June 30, 2022 quarter, compared to $5.2 million for the June 30, 2021 quarter. This decrease was primarily related to management's actions taken on our cost structure over the last 2 quarters. Additionally, we saw a sequential improvement of approximately $1.0 million over the quarter ending March 31, 2022, despite the decrease in revenue. We expect further reductions in the fourth quarter and are targeting positive non-GAAP adjusted operating income during the first quarter of fiscal 2023.

• We reported that as of June 30, 2022, we had working capital of approximately $14.1 million and cash on hand of approximately $9.6 million. Cash on hand used during our quarter ending June 30, 2022 was approximately $2.7 million to fund operations (which was a 26% improvement from our quarter ending March 31, 2022) and $1.0 million to pay our Series A Preferred Dividend.

Notable Business Updates

• The Company completed the sale of its manufacturing assets to Steady State, LLC, significantly reducing its fixed overhead costs, migrating to a more variable cost structure. Participating in Steady State's Series C preferred equity round provides the Company a strategic position in a not only a great supply chain partner, it broadens our product development capabilities. We believe this investment has upside potential as Steady State executes their business plan.

• The Company signed an agreement with Adara Acquisition, LLC to redeem our position subject to its transaction closing with Alliance Entertainment, Inc. This became a condition of Adara's transaction with the target and subject to closing, locks in the return of our capital to strengthen our balance sheet and use in a manner more strategically aligned with our core business and avoids the 6-month lock-up where our investment is subject to ongoing market risks.

• Company successfully launched a marketing campaign on its 2018 Farm Act compliant hemp extracted Delta 9 product assortment with the Joe Rogan Experience podcast and the Dan Lebatard Show with Stugotz in July and seeing strong sequential monthly category growth.

• Earlier this year, the Company filed a citizen's petition with the assistance of the National Products Association (NPA). The citizen's petition response from FDA is due on August 22, 2022. We are prepared and have several administrative options that we are considering depending on their response.

• Our Novel Food Applications were Validated and are now in the Risk Assessment phase in both the UK and EU. In the EU, EFSA put a clockstop hold on all applications preventing them from moving into the Risk Assessment phase. The Company presented EFSA with our data and demonstrated that our application was not deficient, like the other applications and now CBDMD is the only company with an application in the Risk Assessment phase. We believe this provides the Company with a significant lead on obtaining Novel Food approval in the EU for its core broad spectrum formulation and a wide range of products. We anticipate full Novel Foods approval after the Risk Assessment phase is completed in 9-12 months.

• Our separate Human and Animal clinical trials are concluding this month and showing positive preliminary results for both studies. We anticipate publishing our findings during the first fiscal quarter of 2023 and using clinical results to launch marketing campaigns focused on our products' proven benefits.

We will host a conference call at 4:30 p.m., Eastern Time, on Thursday, August 11, 2022, to discuss our June 30, 2022, second quarter financial results and business progress.

CONFERENCE CALL DETAILS

Thursday August 11, 2022, 4:30 p.m. Eastern Time
USA/Canada:	800-319-4610
International:	604-638-5340
Teleconference Replay dial in:
USA/Canada:	855-669-9658
International:	412-317-0088
Replay Passcode:	8972
Webcast/Webcast Replay link- available through August 11, 2023: https://www.gowebcasting.com/11834

About cbdMD, Inc.

cbdMD, Inc. is one of the leading and most highly trusted and most recognized cannabidiol (CBD) brands with a comprehensive line of U.S. produced, THC-free¹ CBD products as well as our new Full Spectrum products. Our cbdMD brand currently includes high-grade, premium CBD products including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD bath bombs, CBD sleep aids and CBD drink mixes and an array of Farm Act compliant Delta 9 products. Our Paw CBD brand of pet products includes veterinarian-formulated products including tinctures, chews, topicals products in varying strengths, and our CBD Botanicals brand of beauty and skincare products including facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care. To learn more about cbdMD and our comprehensive line of U.S. grown, THC-free¹ CBD oil and Full Spectrum products, please visit www.cbdmd.com, follow cbdMD on Instagram and Facebook, or visit one of the thousands of retail outlets that carry cbdMD's products.

Forward-Looking Statements

This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified using words such as ''should,'' ''may,'' ''intends,'' ''anticipates,'' ''believes,'' ''estimates,'' ''projects,'' ''forecasts,'' ''expects,'' ''plans,'' and ''proposes.'' These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. You are urged to carefully review and consider any cautionary statements, including but not limited to expectations on cost reductions, investment in Steady State, future profitability, results from clinical studies and other disclosures, including the statements made under the heading "Risk Factors" in cbdMD, Inc.'s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 as filed with the Securities and Exchange Commission (the "SEC") on December 17, 2021 and our other filings with the SEC. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of cbdMD, Inc. and are difficult to predict. cbdMD, Inc. does not undertake any duty to update any forward-looking statements except as may be required by law. The information which appears on our websites and our social media platforms, including, but not limited to, Instagram and Facebook, is not part of this press release.

¹ THC-free is defined as below the level of detection using validated scientific analytical methods.

Non-GAAP Financial Measures

This press release includes a financial measure that excludes the impact of certain items and therefore has not been calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). cbdMD, Inc. has included adjusted loss from operations because management uses this measure to assess operating performance in order to highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The adjusted operating loss has not been prepared in accordance with GAAP. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, net loss from operations as an indicator of our operating performance. Further, this non-GAAP financial measure, as presented by cbdMD, Inc., may not be comparable to similarly titled measures reported by other companies. cbdMD, Inc. has attached to this press release a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure.

	cbdMD, INC.
	CONDENSED CONSOLIDATED BALANCE SHEETS
	JUNE 30, 2022 AND SEPTEMBER 30, 2021
				(Unaudited)
				June 30,			September 30,
				2022			2021
	Assets
	Cash and cash equivalents		$	9,553,670		$	26,411,424
	Accounts receivable			1,630,233			1,113,372
	Accounts receivable – discontinued operations			1,375			10,967
	Marketable securities			-			33,351
	Investment other securities			1,000,000			1,000,000
	Inventory			4,318,204			5,021,867
	Inventory prepaid			548,580			551,519
	Prepaid sponsorship			1,749,083			1,212,682
	Prepaid expenses and other current assets			1,057,183			1,147,178
	Total current assets			19,858,328			36,502,360
	Other assets:
	Property and equipment, net			775,477			2,561,574
	Operating lease assets			4,751,192			5,614,960
	Deposits for facilities			244,606			529,583
	Intangible assets, net			18,111,903			23,003,929
	Goodwill			11,996,249			56,670,970
				1,400,000			-
	Total other assets			37,279,427			88,381,016
	Total assets		$	57,137,755		$	124,883,376
	CONDENSED CONSOLIDATED BALANCE SHEETS
	JUNE 30, 2021 AND SEPTEMBER 30, 2021
	(continued)
				(Unaudited)
				June 30,			September 30,
				2022			2021
	Liabilities and shareholders' equity
	Current liabilities:
	Accounts payable		$	2,310,244		$	2,978,914
	Deferred revenue			2,250,549			2,727,612
	Accrued expenses			1,155,020			1,151,150
	Note payable			9,461			59,470
	Total current liabilities			5,725,274			6,917,146
	Long term liabilities:
	Long term liabilities			127,949			108,985
	Operating leases - long term portion			3,982,532			4,859,058
	Contingent liability			702,000			9,856,000
	Total long term liabilities			4,812,481			14,824,043
	Total liabilities			10,537,755			21,741,189
	shareholders' equity:
	Preferred stock, authorized 50,000,000 shares, $0.001
	par value, 5,000,000 and 500,000 shares issued and outstanding, respectively			5,000			5,000
	Common stock, authorized 150,000,000 shares, $0.001
	par value, 59,946,110 and 57,783,340 shares issued and outstanding, respectively			59,946			57,783
	Additional paid in capital			178,326,685			176,417,269
	Accumulated deficit			(131,791,631)			(73,337,865)
	Total shareholders' equity			46,600,000			103,142,187
	Total liabilities and shareholders' equity		$	57,137,755		$	124,883,376

 

	cbdMD, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2022 AND 2021
				Three Months			Three Months			Nine Months			Nine Months
				Ended			Ended			Ended			Ended
				June 30,			June 30,			June 30,			June 30,
				2022			2021			2022			2021
	Gross Sales		$	8,868,093		$	11,352,585		$	28,673,718		$	36,941,917
	Allowances			(275,200	)		(792,062)			(1,130,117	)		(2,254,481	)
	Total Net Sales			8,592,893			10,560,523			27,543,601			34,687,436
	Cost of sales			2,660,185			3,370,952			10,176,085			10,444,353
	Gross Profit			5,932,708			7,189,571			17,367,516			24,243,083
	Operating expenses			8,282,931			13,865,191			31,690,915			36,846,371
	Impairment of Goodwill and other intangible assets			30,776,436			-			48,959,721			-
	Loss from operations			(33,126,659)	)		(6,675,620)			(63,283,120	)		(12,603,288	)
	Realized and Unrealized gain (loss) on marketable and other securities, including impairments			-			(18,623)			(33,352	)		526,940
	Gain (loss) on extinguishment of debt			-			1,466,113			-			1,466,113
	Decrease (increase) of contingent liability			1,943,000			6,871,000			8,246,000			(10,500,000	)
	Gain (loss) on sale of assets			88,769			-			88,769			-
	Restructuring expense			(602,092)			-			(602,092	)		-
	Other income			64,390			-			137,377			-
	Interest (expense) income			(1,551	)		(2,582)			(6,871	)		(23,573	)
	Loss before provision for income taxes			(31,634,143	)		1,640,288			(55,453,289	)		(21,133,808	)
	Benefit for income taxes			-			(103,000)			-			765,000
	Net (Loss) Income			(31,634,143	)		1,537,288			(55,453,289	)		(20,368,808	)
	Preferred dividends			1,000,501			560,281			3,001,503			1,220,610
	Net Loss attributable to cbdMD, Inc. common shareholders		$	(32,634,644	)	$	977,007		$	(58,454,792	)	$	(21,589,418	)
	Net Loss per share:
	Basic earnings per share			(0.55	)		0.02			(0.99	)		(0.40	)
	Diluted earnings per share			(0.55	)		0.02			(0.99	)		(0.40	)
	Weighted average number of shares Basic:			59,316,762			56,676,326			59,229,208			54,089,263
	Weighted average number of shares Diluted:			59,316,762			61,431,643			59,229,208			54,089,263

 

	cbdMD, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
	FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2022 AND 2021
				Three Months			Three Months			Nine Months			Nine Months
				Ended			Ended			Ended			Ended
				June 30,			June 30,			June 30,			June 30,
				2022			2021			2022			2021
	Net (Loss) Income		$	(31,634,143)		$	1,537,288		$	(55,453,289	)	$	(20,368,808	)
	Comprehensive (Loss) Income			(31,634,143)			1,537,288			(55,453,289	)		(20,368,808	)
	Preferred dividends			(1,000,501)			(560,281)			(3,001,503	)		(1,220,610	)
	Comprehensive (Loss) Income attributable to cbdMD, inc. common shareholders		$	(32,634,644)		$	977,007		$	(58,454,792	)	$	(21,589,418	)

 

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2022 and 2021
		Nine Months			Nine Months
		Ended			Ended
		June 30,			June 30,
		2022			2021
Cash flows from operating activities:
Net Loss	$	(55,453,289	)	$	(20,368,808	)
Adjustments to reconcile net (income) loss to net
cash used by operating activities:
Stock based compensation		424,455			807,523
Restricted stock expense		504,650			1,137,583
Marketing stock amortization		717,174			660,232
Issuance of stock / warrants for service		-			98,605
Inventory and materials impairment		878,142			-
Intangibles amortization		607,025			-
Depreciation		770,335			719,856
Impairment of Goodwill and other intangible assets		48,959,721			-
Increase/(Decrease) in contingent liability		(8,246,000	)		10,500,000
Realized and unrealized loss of Marketable and other securities		33,350			(526,939	)
Termination benefit		-			495,568
Extinguishment of Paycheck Protection Program Loan		-			(1,466,113	)
Amortization of operating lease asset		863,768			922,057
Changes in operating assets and liabilities:
Accounts receivable		(116,861	)		(556,116	)
Deposits		284,977			261,125
Inventory		(174,479	)		(135,058	)
Prepaid inventory		2,939			(385,410	)
Prepaid expenses and other current assets		(1,088,579	)		(141,393	)
Accounts payable and accrued expenses		(1,149,456	)		(603,216	)
Operating lease liability		(872,656	)		(846,914	)
Deferred revenue / customer deposits		3,723			4,478
Collection on discontinued operations accounts receivable		9,592			428,667
Deferred tax liability		-			(765,000	)
Cash used by operating activities		(13,041,469	)		(9,759,273	)
Cash flows from investing activities:
Proceeds from sale of other investment securities		-			540,000
Purchase of other investment securities		-			(750,000	)
Proceeds from sale of assets		(322,017	)		-
Purchase of property and equipment		(462,221	)		(311,572	)
Cash provided (used) by investing activities		(784,238	)		(521,572	)
Cash flows from financing activities:
Proceeds from issuance of preferred stock		-			15,798,115
Note payable		(31,044	)		(137,292	)
Preferred dividend distribution		(3,001,003	)		(1,220,610	)
Cash provided by financing activities		(3,032,047	)		14,440,213
Net increase (decrease) in cash		(16,857,754	)		4,159,367
Cash and cash equivalents, beginning of period		26,411,424			14,824,644
Cash and cash equivalents, end of period	$	9,553,670		$	18,984,012
Supplemental Disclosures of Cash Flow Information:
		2022			2021
Cash Payments for:
Interest expense	$	6,817		$	23,573
Non-cash financial activities:
Issuance of Contingent earnout shares:	$	908,000		$	12,596,089
Warrants issued to representative	$	-		$	254,950

 

cbdMD, Inc.
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF NON-GAAP ADJUSTED INCOME (LOSS) FROM OPERATIONS
			Three Months			Three Months			Nine Months			Nine Months
			Ended			Ended			Ended			Ended
			June 30,			June 30,			June 30,			June 30,
			2022			2021			2022			2021
GAAP (loss) from operations		$	(33,126,659)		$	(6,675,620)		$	(63,283,120)		$	(12,603,288)
Adjustments:
Depreciation & Amortization			435,910			246,533			1,377,361			719,856
Employee and director stock compensation (1)			(938,285)			959,319			851,517			2,049,326
Other non-cash stock compensation for services (2)			-			28,650			-			97,721
Inventory adjustment (3)			-			50,000			878,142			50,000
Write down of legacy accounts receivable (4)			-			-			-			-
Impairment of goodwill and other intangible assets (5)			30,776,436			-			48,805,436			-
Accrual for severance			107,261			-			129,761			703,022
Accrual / expenses for discretionary bonus			-			150,000			150,000			450,000
Non-GAAP adjusted (loss) from operations		$	(2,745,337)		$	(5,241,118)		$	(11,090,903)		$	(8,533,363)

(1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(2) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(3) Represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory.
(4) Write down of legacy accounts receivable.
(5) Represents non-cash goodwill impairment of $44,520,436 and impairment of the cbdMD trademark of $4,285,000.

Contacts:

Investors:
cbdMD, Inc.
John Weston
Director of Investor Relations
john.weston@cbdmd.com
(704) 249-9515

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